Hewlett Packard Pty Ltd v Subasic - [2021] ACTCA 3

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

COURT OF APPEAL

Case Title:

Hewlett Packard Pty Ltd v Subasic

Citation:

[2021] ACTCA 3

Hearing Dates:

9 and 10 November 2020

Decision Date:

19 February 2021

Before:

Murrell CJ, Elkaim J and Charlesworth J

Decision:

See [106]

Catchwords:

APPEAL – CONTRACT – alleged underpayment of sales commission – whether employee entitled to claimed commission under a sales incentive program – employer having discretion to cancel program – whether terms of the sales incentive program binding in contract whilst the program remained on foot –

whether payment of commission under the program subject to

approval by the employer – whether implied term of good faith applied to approval – whether employer entitled to retrospectively “cap” incentive payments – whether “least

burdensome principle” applied to assessment of award – appeal

dismissed

APPEAL – CROSS-APPEAL – pre-judgment interest – whether

discretion to award interest from date of commencement of

proceedings rather than from an earlier date miscarried – relevance of delay in exercise of the discretion – cross-appeal

dismissed

Cases Cited:

House v R (1936) 55 CLR 499
Kalls Enterprises Pty Ltd (in liq) v Baloglow (No 3) [2007]
NSWCA 298

Maredelanto Compania Naviera S.A. v Bergbau-Handel GmbH

[1971] 1 QB 164
Stelmag Pty Ltd v Long Paddock Pty Ltd & Ors [2005] ACTSC
59
Subasic v Hewlett-Packard Australia Pty Ltd [2020] ACTSC 2

Hewlett-Packard Australia Pty Ltd (ACN 004 394 763)

Parties:

(Appellant)

Melinda Subasic (Respondent)

Representation:

Counsel

J Fernon SC with J Larkings (Appellant)

I Taylor SC with D Snyder (Respondent)

Solicitors

Baker & McKenzie (Appellant)
Just Dispute Resolution (Respondent)

File Number:

ACTCA 8 of 2020

Decision under appeal:

Court/Tribunal:	Supreme Court of the ACT
Before:	McWilliam AJ
Date of Decision:	30 January 2020
Case Title:	Subasic v Hewlett-Packard Australia Pty Ltd
Citation:	[2020] ACTSC 2

THE COURT:

1.       The appellant, Hewlett-Packard Australia Pty Ltd (HP), operates an information and communication technology business. The respondent, Melinda Subasic, was employed by HP as a sales representative between May 2005 and November 2013.
2.       Three years after she left her employment, Ms Subasic commenced a claim against HP alleging that she had been underpaid $309,750.39 in commissions she alleged she had earned under a sales program. The claim related to a six-month period between 1 November 2009 and 30 April 2010 (the measure period). Ms Subasic exceeded her sales quotas in the measure period to such an extent that she was 500 per cent over budget.
3.       The primary judge concluded that the provisions defining the sales program were enforceable in contract and that HP was in breach of its terms, so giving rise to a debt. Judgment was entered for Ms Subasic in the whole of the claimed amount, plus interest calculated from the date that the proceedings were commenced: Subasic v Hewlett-Packard Australia Pty Ltd [2020] ACTSC 2.
4.       HP appeals from the judgment and orders, both as to liability and as to damages.
5.       Ms Subasic cross-appeals from the order awarding…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Hewlett Packard Pty Ltd v Subasic

Details

AGLC: Hewlett Packard Pty Ltd v Subasic [2021] ACTCA 3
Case: [2021] ACTCA 3
Decision Date: 10 November 2020

CaseChat Overview and Summary

Hewlett Packard Pty Ltd appealed a decision of the primary judge concerning an alleged underpayment of sales commission to Ms. Subasic. The dispute centred on whether Ms. Subasic was entitled to a claimed commission under a sales incentive program, notwithstanding Hewlett Packard's asserted discretion to cancel the program and the retrospective application of a cap on incentive payments. The appeal was heard by Murrell CJ, Elkaim and Charlesworth JJ.

The court was required to determine two principal legal issues. Firstly, whether the employment contract limited the method by which the amount of an incentive payment could be calculated or recalculated during a review process. Secondly, whether it was permissible for Hewlett Packard to make changes to a Sales Plan with retrospective effect, applying to a measurement period or part thereof that had already occurred.

The court reasoned that even if a discretion existed to retrospectively cap incentive payments, this discretion was exercised capriciously in the circumstances. The evidence indicated that Hewlett Packard encouraged its sales employees to aggressively pursue sales, even after Ms. Subasic had exceeded her quotas and triggered a review. A letter from February 2010 urged employees to exploit market opportunities for increased profitability, suggesting Hewlett Packard was aware of the favourable commercial environment generating high sales. Instead of adjusting quotas to reflect this, employees were encouraged to achieve higher performance. The court found that the subsequent imposition of a cap on incentive payments for high-performing employees, without substantive reasons and without informing employees that sales beyond a certain threshold would not be rewarded, demonstrated an arbitrary and unreasonable exercise of discretion, thereby defeating the commercial purpose of the incentive program.

Orders

Orders of the court

See [106]

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

The “advice notes” accompanying that table included the following statements: 2. TOTAL REMUNERATION This is the salary figure used for salary administration purposes. It is the salary figure including Taxable Base Salary, Employee salary sacrifice superannuation contributions (if exercised), company superannuation contributions, and all salary package vehicle deductions (if applicable). Total Remuneration excludes: profit share, employee share plan and other benefits. … 5. NOTIONAL SALARY The Notional Salary figure is used in the calculation of some employee salary components, for example Superannuation. This Notional Salary is calculated by taking the employee’s TR amount and multiplying it by 91.8%. As to the content of HP’s obligations, there are two questions to consider. The first is whether the employment contract limited the method by which the amount of an incentive payment may be calculated or recalculated in the conduct of a review. The second is whether it would be permissible for HP to make changes to a Sales Plan having retrospective effect so as to apply to a measure period or a part of a measure period that has occurred in the past. The “Weighted Performance Attainment” (WPA) is a percentage figure derived from weighted sales quotas set out in the Sales Letter. In the case of Ms Subasic, there were three product lines weighted at 50 per cent, 25 per cent and 25 per cent, so as to incentivise sales of product lines with the greater weighting. And, at [81], under the heading “The implied term of good faith”, her Honour said: If I am wrong as to that construction, I would have found that there was an implied term of good faith in the exercise of the discretion with regard to the incentive payment under the Program as amended, the content of which (ascertained by reference to the terms of the Employment Agreement) was that the Employer could not decide arbitrarily, capriciously or unreasonably that it need not pay an incentive payment where the set objectives had been satisfied. It arises to give business or commercial efficacy to the particular clause of the contract. It would defeat the commercial purpose of the clause if it were construed as permitting the Employer to introduce an incentive program, expressly remove a cap on incentive payments, market the program as rewarding strong performance, and then when employees performed strongly, exercise its discretion to refuse to pay the incentive specified. HP’s own documents describe the decision as one involving the imposition of a cap. No substantive reasons were provided for the imposition of the cap in that manner. The circumstance that all high performing employees had their incentive payments capped at 350 per cent of TIA plainly supports an inference that the capping occurred for reasons other than irregularities affecting any particular sales by any particular employee that might justify HP refusing to credit dubious sales against the employee’s quotas. If more evidence were required, it may be found in a letter addressed to HP’s sales employees in February 2010. It is to be recalled that at around that time, Ms Subasic had already exceeded her sales quotas to an extent that triggered a review. It is an uncontested fact that the review was not conducted at that time and, accordingly, Ms Subasic was not informed that all sales beyond the next trigger threshold of 350 per cent would not be rewarded. To the contrary, the letter of February 2010 urged HP’s sales employees to aggressively pursue sales into the second quarter of the financial year. The letter referred to changes in the market that created significant opportunities for HP’s profitability. The letter was a rallying call for high sales performances to exploit what HP clearly understood to be a bullish commercial environment. The letter plainly demonstrates that HP knew, as at February 2010, that the then-prevailing economic circumstances were generating very high sales. However, rather than adjust sales quotas upon review so as to make it more difficult for its sales employees to achieve their quotas, HP urged the employees on to higher and higher performance. As has been said, the review upon which HP now relies was not conducted until the measure period was complete. That is the factual background against which the question of breach is to be assessed. In our view, even if there existed a discretion to retrospectively cap the incentive payment, the discretion was exercised capriciously on the particular facts just described.